KEY POINTS:
Households are feeling the squeeze from higher interest rates with a sharp increase in the number failing to make loan repayments on time, figures released yesterday by New Zealand's biggest bank ANZ National show.
The bank's December quarter general disclosure statement reveals past due assets, where loan repayments are more than 90 days in arrears, rose to $153 million from $94 million at the same date a year earlier.
ANZ National chief executive Graham Hodges said the "modest" increase in arrears had occurred mostly on mortgages and consumer loans.
"That reflects the squeeze that we're starting to see in the household sector, particularly as a result of the flow through of interest rate increases that have been coming through.
"It's an early indicator to say the cycle is changing. We would have been seeing that happening right through 2007 as pressure was building and we'd expect to see that in 2008 as well. "It's a question of how we manage that so those arrears don't turn into losses. People do adjust their budgets and the self-cure rate on this is very good."
Households that had to refinance home loans during December, for example, had faced an interest rate increase of about 2 per cent.
That pressure was expected to be felt further as more households were required to refinance.
Since December, fixed mortgage rates have risen as banks look to cover the higher cost of funds as a result of the global credit crunch.
Hodges said he expected the squeeze on households to intensify even if the Reserve Bank relaxed its interest rate stance.
"My personal view is that as these higher costs of funds internationally will continue to flow through, we'll see those in local interest rates both for the household and corporate sectors. That will happen irrespective of what the Reserve Bank is doing with the official cash rate." Meanwhile, the pressure on households has also pushed ANZ National's impaired asset provisioning - the money it set aside during the year to cover potential and actual bad loans - up to $32 million from $25 million a year earlier.
The bank's total provisioning, including $436 million in collective provisions, rose to $478 million against $471 million a year earlier.
Hodges again described the increase as modest when set against the bank's $91.16 billion in gross loans and advances. The bank's overall credit quality remained "strong across all segments".
Yesterday's figures show ANZ National made a solid start to the financial year with a net profit of $310 million against $350 million a year earlier, a figure boosted by the $79 million gain on the sale of its Fleet Partners business in 2006.
PAYMENT PAIN
* Rising interest rates have seen more households fall behind on home and consumer loan repayments, ANZ National Bank says.
* Loan repayments to the bank more than 90 days late rose 63 per cent in the 12 months to December.
* The bank says this is an early indicator the credit and business cycle has turned.
* Nevertheless, ANZ National says its level of impaired assets, or loans at risk of not being repaid, remain at historically low levels.
